Pound rebounds on talk of accelerating rate hikes from BoE, Brexit optimism

The pound bounced back from its early losses on Friday as sentiment was bolstered by a hawkish outlook from a BoE policy maker and some positive progress in the Brexit process.

Sterling is on a mixed footing this month. With only GBP/USD showing any positive movement as it rises to US$1.4185. Meanwhile GBP/EUR and GBP/CAD are flat at €1.1451 and C$1.8223 respectively, while GBP/AUD tumbled 0.2% to AU$1.8324 and GBP/NZD slid to NZ$1.9465.

The UK’s latest mortgage figures will be released today, which may see GBP tumble should approvals have declined as expected…

What’s been happening?

The pound initially trended lower against both the euro and US dollar on Friday morning, extending its losses in the wake of the Bank of England’s (BoE) latest rate decision.

However Sterling was able to mount a recovery later in the day following some hawkish comments from the BoE’s Gertjan Vlieghe.

In a speech in Birmingham, Vlieghe suggested that in light of recent employment figures there was a case for the BoE to implement up to two rate hikes a year for the next couple of years, a considerably more hawkish stance than at the start of the year.

This, combined with the announcement that a transition deal had been agreed with the EU helped the pound fly higher towards the end of the European session.

Some broad based weakness in the US dollar saw GBP/USD close last week’s session close to a six-week high as rising concerns over Trump’s trade stance undermined a stronger that expected rebound in US durable goods orders.

Friday saw China threaten to retaliate against the US tariffs announced by Trump late on Thursday, which weighed on the US dollar as investors feared escalating trade tensions could led to a trade war between the two countries.

Meanwhile Friday’s recovery in GBP/EUR exchange rate proved to be more modest as the euro was also bolstered by the sell-off of the US dollar.

What’s coming up?

The pound may fall at the start of this week’s session, following the release of the UK’s latest mortgage figures later this morning.

Economists anticipate today’s data will reveal that mortgage approvals fell in February, with an expected drop to 39,000, possibly weighing on Sterling sentiment.

The European Central Bank’s (ECB) Danièle Nouy will speak later this afternoon, which may prompt some movement in the euro, with investors eager to learn whether the bank has shifted its focus towards the path of managing interest rates rather than tinkering with bond purchases, as some sources suggest.

Meanwhile a couple of Federal Reserve policymakers are also due to speak later today, with the US dollar possibly ticking higher if they appear upbeat about the current direction of the US economy.